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What is a Dark Store and Why Are They the Future of Retail?

A dark store isn’t a shop that has shuttered its lights or closed up shop – it’s a new kind of retail store that could be the future of post-pandemic retail. 

Whether it’s through shopping at brick-and-mortar retail stores or online eCommerce, customers expect instant gratification. One of the biggest benefits that brick-and-mortar stores are their ability to offer products and services to their customers at a moment’s notice. There’s no product description or product photography that can come close to replicating the feeling of handling a product with your own hands. 

With measures loosening in much of the northern hemisphere, once shuttered businesses and stores have opened again with a new purpose – as dark stores. 

Dark stores aren’t a new concept, but they have been instrumental in helping businesses stay solvent during the COVID-19 pandemic and could be the new face of retail moving forwards. If you’re not sure what a dark store is, the benefits they provide or how to operate one, let’s explore what they are together! 

What is a Dark Store? 

what is a dark store

The term ‘dark store’ refers to any retail space or store that has converted some or all of its capacity into a fulfillment centre. Similar to how ghost kitchens exclusively fulfill online orders, dark stores are designed to fulfill orders placed on their digital, eCommerce equivalents. 

Dark stores can offer consumers access to faster and more affordable online fulfillment options than ever before. 

The Growth of the Dark Store Concept

Although retail experiences offer many immediate advantages, the COVID-19 pandemic and the many preventive measures that followed in its wake have made executing it incredibly difficult. With no other choice, customers turned to digital channels to make their purchases, a shift that led to an incredible increase in eCommerce sales. 

According to research from IBM, the pandemic has shifted the advancement of eCommerce by five years, with a 75% decline in retail sales. To remain competitive, the report details that retailers need to provide new delivery fulfillment to meet new expectations from their customers.

In metropolis centres, such as New York and Los Angeles, many big-box retailers have already started transitioning. Bed Bath & Beyond, a home goods retailer, announced in early 2020 that they would be transitioning a quarter of their retail stores into regional fulfillment centres. Fashion brands, which reported record-low sales during the peak of the pandemic, are also shifting their brick-and-mortar locations into dark stores.

In a digital-first world where consumers have near limitless digital options to choose from, dark stores aren’t just nice to have; they’re essential. 

The dark store concept is already incredibly popular with grocery stores such as Whole Foods, which transformed some of their traditional store locations to cater specifically to online shoppers and online order fulfillment.

Here are some other reasons why the dark store concept is growing in popularity.

Faster, More Flexible Delivery Options

dark store delivery

With a dark store, customers have the option of having their products delivered from a dark store that’s nearby instead of a fulfilment centre or distribution hub that’s far away.

Additionally, by transforming retail storefronts into miniature fulfillment centers, retailers can offer increased retail fulfillment options to their customers. Options such as click-and-collect, curbside pickup and pick-up in-store options can enhance or compete with other order fulfillment options such as home delivery and same-day delivery.

Dark shops also tend to be located in physical locations in dense, urban centres. Offering click-and-collect capabilities in addition to check-out counters offers more consumer choice. These micro-fulfillment centers also lower delivery expenses and fulfillment times due to their close proximity to their customers.

Dark stores exceed at delivering customer-facing fulfillment experiences that center around turning stores into micro-fulfillment centres. Physical stores will still be present, but the focus will shift to online sales and fulfilling online orders.

Hybrid Stores

Fast delivery is one of the core elements of a positive fulfillment experience, and dark stores are perfect at bridging the gap between online delivery and offline sales. Not only do dark stores have the potential to provide a traditional brick-and-mortar retail experience (albeit limited), they’re also capable of providing customers with more than one fulfillment option. 

However, not all dark stores will offer a hybridized shopping experience. Some dark stores might offer a dedicated pickup area inside, in addition to sale displays and shelving. However, another brick and mortar location might designate the majority of their shop floor store as customer-free zones for optimal picking and increased warehouse efficiency.

Whatever the case may be, retailers have a vast range of options to decide how they’d like to best manage their store’s physical location. Some dark stores might cater exclusively to online sales while other locations might offer a more hybridized model.

Improved Inventory & Warehouse Management 

SME dark stores

Splitting and spreading store inventory across a variety of hybrid dark stores can also improve inventory and warehouse management. If a product is sold out in one dark store location, retailers can dispatch last-mile delivery couriers to fulfill that order from another location within the same day without having to rely on a fulfillment center. 

Spreading inventory across different multiple dark stores can also help control inventory more efficiently. Sometimes, stores with too much inventory lack the physical space and logistics to accurately manage their stock.

By splitting up their stock over more stores, stores are able to track inventory levels, accurately fulfill orders stay on top of stock replenishment much more efficiently.

Lower Operating Costs & Faster Fulfillment

Distribution, logistics and fulfillment costs make up the bulk of the costs associated with online order fulfillment. When in-store pickup and curbside pickup are included as options, the high distribution costs and long-fulfillment times that traditional warehouses demand simply can’t compete.

Regardless of the industry, fast fulfillment times are key. In the context of online grocery store orders, food products and perishables risk spoiling if the logistics and supply chain can’t keep up with the demand. Automated pickers and machinery might make sense in the context of a large warehouse, but their expensive price tag and demand for more space are inhibiting factors for local retailers.

A traditional physical store already dictates high-rent prices. By switching to a hybridized dark store model, traditional retailers can offset their capital expenditure by simultaneously offering online shopping fulfillment as well as faster and cheaper home delivery.

How to Operate a Dark Store

Dark stores offer massive growth for the businesses that adopt them, but many retailers will struggle to implement it successfully. Inventory logistics, the management of electronically generated orders and training store employees to pick and pack orders are the barriers to entry that dark stores demand.

For stores that want to offer fast eCommerce shipping for their online orders in addition to a traditional retail experience, Cantec Couriers offers a comprehensive logistics and shipping solution that integrates seamlessly with your store.

Available on desktop, iOS and Android, Cantec Couriers provides your store with a delivery scheduler on your checkout page that integrates with your store’s inventory and stock levels to improve SKU management. Dark stores stock levels will automatically update to reflect online orders as well as POS sales to provide flawless warehouse control and the highest order accuracy.

When your customers make a purchase, they can choose from a variety of shipping options including in-store pickup, curbside pickup and same-day delivery. Flexible shipping times, speeds and rates offer your customers more convenience than ever before and help you save on operating expenses.

Don’t have a delivery van? No problem! Our platform gives you the option to use our trained and vetted fleet of delivery drivers or to onboard your own employees. Our native iOS and Android apps not only track driver commission and performance but also provides automatic route optimization and real-time status updates to further reduce your expenses and delivery times.

Many stores have already adopted the dark store model to deliver an omnichannel experience. Don’t be left in the dark – sign up today to make your online experience as satisfying and fulfilling as your retail experience!

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